China's Energy Future after Fukushima: Challenges and Opportunities

Disaster at Fukushima

BY PAUL HORAK China’s energy plans have always been a function of demand and technological innovation, which are both growing rapidly in the country. But the recent tragedy at the Fukushima-Daiichi nuclear plant in Japan has introduced a new variable into China’s energy-planning function: safety. The nuclear fallout at Fukushima was caused by a 9.0 magnitude earthquake and subsequent tsunami — both distinct possibilities in earthquake-prone China. (Lester, 2011) For that reason, the Chinese government suspended the construction of new nuclear power plants near its coastal cities and started a process of inspection of all its nuclear power-generating facilities. (IAEA, 2011) China’s nuclear ambitions have been put on hold, but probably not for long.

China’s current nuclear ambitions are extraordinary. If things progress as planned, China will construct more nuclear power-generating facilities than the rest of the world combined over the next twenty years. (Lester, 2008) It has not placed all its eggs in one basket either: China is already the world leader in the production of solar and wind technologies. Its growing energy needs have forced it to become a global leader in developing sophisticated energy technologies, a rarity for a developing country. This paper will focus less on China’s growing energy demand and more on its burgeoning energy supply, that is, its greater planned capacity for power generation. Although nuclear power has long been touted as the answer to China’s environmental and energy crises, recent events at Fukushima have cast doubt on its future viability as a source of clean, safe power generation. Will China choose to sacrifice its nuclear ambitions? Will it redirect its investments to other clean energies? Probably not, but its government will have to face the risk of a repeat of the Fukushima disaster.

China's Accelerating Energy Demand

China’s accelerating energy demand has global implications. It surpassed the United States as the world’s largest carbon-dioxide emitter in 2008, despite using about 80 percent less energy per-capita. (Joerrs et al., 2009) China’s high carbon-dioxide emissions can be attributed to its heavy reliance on coal as the major source of power-generation. More than 80 percent of the country’s power generation comes from coal alone; clean power-generation by contrast accounts for just 3 percent of the total. (World Nuclear Association, 2011) China’s reliance on coal—which accounts for approximately 30 percent of its emissions—has translated into severe environmental degradation and public health problems. (Joerrs et al., 2009) Its rising affluence may not moderate these negative effects, as has been the case in other rapidly developing countries. For example, just seven out of every 1000 Chinese drive an automobile—compared with 120 per every 1000 in the rest of the world (in the developed world this statistic is even higher). If Chinese levels of automobile usage were to rise to global levels, its CO2 emissions would rise dramatically (as would oil prices). (Joerrs et al., 2009) This is perhaps one of the reasons the Chinese Government has invested so heavily in high-speed rail technology in recent years.

 China's Clean Energy Plans

Despite its high dependence on coal and huge coal reserves, China has invested relatively little in clean coal technologies. (BP, 2011) It has instead funneled its investments into clean energy sources, namely hydro, nuclear, wind and solar power. Approximately 16 percent of China’s current electric power is generated through hydropower; 2 percent through nuclear; and the remaining 1 percent split between wind and solar. (World Nuclear Association, 2011) However, a 2010 report by McKinsey and Company estimates that if China’s current investment trends in clean energy continue, the country’s share of power generated through hydro, nuclear, wind and solar power could exceed 50 percent by 2030. (Woetzel et al., 2010) This estimate speaks to China’s clean energy ambitions and desire to diversify its energy portfolio, as outlined in the country’s 10th, 11th and 12th Five-Year Plans.

Nuclear

The McKinsey Report estimates that nuclear power generation may account for approximately 16 percent of the country’s power generation by 2030—a significant increase from its modest 2 percent share as of 2010. (Woetzel et al., 2010) Nuclear power holds several advantages over wind and solar power. Although it is capital intensive, nuclear power generation requires a relatively small use of land and is easily connected to already existing power grids. Wind and solar power, by contrast, both require the extensive use of land and can only be harnessed in remote areas where the wind and sun are more concentrated. Consequently, most wind and solar power generation occurs thousands of miles away from centers of demand. (Kong, 2010) 

Figure 2 is a map of China’s existing and planned nuclear power plants. China’s energy demand is far from evenly distributed: all of China’s nuclear plants are concentrated in the most developed parts of the country along the eastern coast. (World Nuclear Association, 2011) This not only reflects the need for energy in the coastal areas, but also the fact that nuclear power generation requires large amounts of water, which can only be attained from the sea or large rivers. (IAEA, 2011) Even the more sophisticated nuclear power plants require lots of water, reducing the likelihood of adopting nuclear power generation as the solution to future demands for electricity in China’s interior. Wind, solar and coal will have to suffice there.

Most of the nuclear power plants under construction in China employ Generation II (Gen II) nuclear reactors. (World Nuclear Association, 2011) These Gen II reactors are largely the products of Chinese design and innovation, but in order to move up to Gen III and Gen IV reactors, China will need to cooperate with foreign governments and tech firms. It is already doing so with the construction of four Gen III plants in Sanmen and Haiyang by the State Nuclear Power Technology Corporation, which are slated for completion by 2015. (World Nuclear Association, 2011) The government acquired the Gen III reactor technology being used in the Sanmen and Haiyang plants from Westinghouse, a leader in the development of nuclear electric power generation. The decision to import foreign technology in this case was a departure from previous practices of using only domestic nuclear technology in the majority of its operations. (China is capable of producing about 70 percent of the parts needed in Gen II reactors.) However, it reflects the Chinese government’s desire for cleaner and safer nuclear technologies.

The Westinghouse AP 1000 Gen III reactors being built at Sanmen and Haiyang are estimated to be 100 times safer than their Gen II predecessors. (IAEA, 2011) Many of the reactors at the Fukushima-Daiichi plant were Gen II reactors. Originally commissioned in 1971, the Fukushima reactors were scheduled to be decommissioned at the start of 2011, in line with the standard 40-year life span of Gen II reactors. But improvements made to the reactors—in step with global nuclear technology enhancements and improved standards—permitted 10 more years of power generation at the plant. (Lester, 2011) The life spans of nuclear reactors are indeed long; most of the Gen II reactors (also called Gen II+ reactors because they are outfitted with the latest technology enhancements) being built in China are expected to be in operation 60 to 70 years after their original commission date. (Lester, 2008) This means that China’s use of just a few safer Gen III reactors will not cancel out the much higher safety risks posed by its use of many Gen II+ reactors.

If China’s current Gen II+ reactors were to be subjected to Fukushima-like forces, they may be unable to cool properly, which was the root of the tragedy at Fukushima. The AP1000 model employs a passive containment cooling system that does not require electric input to cool down. (IAEA, 2011) When the tsunami destroyed Fukushima’s back-up generators, the electric power supply to the cooling system was lost and nuclear fuel rods began to overheat. The resulting attempts to cool the fuel rods were what eventually cast radioactivity into the atmosphere, not the breach of any of the reactors’ containment chambers. (Lester, 2011) Fukushima proves that current safety standards that require nuclear fallout to be contained within the plant’s facility do not guarantee that radioactivity will not escape to larger areas. There is always a risk in using nuclear power, even if it steadily diminishes with the advent of new technological innovations.

 Solar

China is already the world’s largest producer of solar technologies. (Li, 2009) Yet despite this, the country receives less than a percent of its total power generation from solar sources. This is a testament to the relative youth of the industry, but also to solar power’s limited viability in China today. Solar power will become more viable with increased westward expansion and constant technological upgrades. In fact, McKinsey estimates that solar power could account for as much as 8 percent of China’s total power generation in 2030. (Woetzel et al., 2010)

Adopting the use of solar power as a major generator of electricity will depend in large part on Chinese investments in the use of ultra-high-voltage (UHV) transmission lines. (Li, 2009) UHV lines transmit electricity over long distances without losing much voltage, but they are extremely costly to build and maintain. (Winning, 2009) The development of UHV lines is essential to the future success of Concentrated Solar Power (CSP). CSP involves the use of large mirrors to focus sunlight on large tanks of water to generate steam. The Chinese government has authorized the establishment of a gigantic CSP facility in Central China where the sunlight is the most intense. Transporting that energy to the coastal cities will depend on the successful development of UHV lines. (Liu, 2011)

Photovoltaic (PV) solar power is another option in addition to CSP. It does not necessarily require the development of UHV lines, but instead requires vast amounts of land in order to produce enough energy for it to be worthwhile. (Li, 2009) PV solar power is the more conventional type of solar power—photovoltaic cells are the light absorbing components of solar panels. Finding large amounts of unutilized land around China’s eastern cities is a difficult task; not to mention that buying enough land to make PV cells work would be very expensive. Despite its obvious limits to domestic use, the Chinese have invested billions of dollars in PV solar cell technology. Expected improvements in PV cell technology are expected to contribute to huge reductions in cost, and could induce an export market for the technology. (McKinsey, 2010) (Using PV solar power in China today is about 500 percent more expensive than simply burning coal, but should only be 50 percent more expensive by 2030.) Regardless of the future of a substantial market for PV solar cells in China, it is likely that there will at least be demand for such goods from the United States or Europe—both well behind China in solar technology.

WindIn addition to investing heavily in solar technology, the Chinese are also pouring money into the development of more advanced wind technology. McKinsey estimates that electricity generated from wind power could account for up to 12 percent of China’s total power generation in 2030—a substantial increase from less than a percent today. (McKinsey, 2010) But wind power like solar polar is also subject to considerable limitations. Onshore wind generation facilities require lots of land and wind—both of which are only available in large supply in the northwestern China, the least developed part of the country. Western wind farms could be connected to eastern centers of demand via UHV lines, but this would probably be more costly than the CSP case since the distance the electricity would have to travel would be greater. Onshore wind power is limited by its remote sources.

Offshore wind farms, located in the sea, do not suffer from such limitations and are known to produce more energy (there’s more wind). The Chinese have started to build offshore wind farms off the eastern shores of the country but such projects are complicated by the unpredictable corrosive powers of the ocean. Building and maintenance fees are 35 percent higher for offshore wind farms than they are for onshore ones. (McKinsey, 2010) Those added costs might currently dwarf the costs of transmitting energy over thousands of miles from the west, but there is also speculation that China’s green future could be redeemed by an inevitable demographic trend: migration to the west. The soaring property prices in eastern China are forcing producers to move their production elsewhere, where land and labor costs are lower. China’s central and western territories—the hubs for CSP solar power and onshore wind power generation—are alluring targets for low-cost production.

Challenges

China is undoubtedly experiencing a green revolution. But contrary to popular belief that revolution is not the product of some well-developed plan on the part of China’s Central Government. (Ahrens, 2010) Energy projects in China are not driven by national policies, but instead by narrow corporate and local interests. (Lester, 2008) In fact, China’s Central Government has never really had much success in dictating national energy policy. Today, the National Development and Reform Commission (NDRC) is in charge of planning long-term energy strategy, setting energy prices, and approving potential energy projects. Established in 2003, it is the direct successor to two failed initiatives by the Central Government to play a more proactive role in controlling energy policy implementation: the State Energy Commission (SEC) in the early 80’s and the Ministry of Energy (MOE) in the late 80’s and early 90’s. (Brookings, 2008) Both the SEC and MOE suffered from a lack of manpower and direct control. The NDRC has more of both but is operating in a much more complicated environment: while the number of decision makers has expanded, the power of regulatory bodies and policy centers like NDRC has declined. This may have serious consequences for the development of China’s cleaner technology industries.

This is especially true in the nuclear power industry. Some of China’s biggest State-Owned Enterprises (SOEs) are involved in the development of nuclear power generation. China has 3 major enterprises devoted to the construction of nuclear power facilities and the development of new nuclear technologies: China National Nuclear Corporation (CNNC), China Guangdong Nuclear Power Group (CGNPG) and the small but well-connected State Nuclear Power Technology Corporation (SNPTC). (World Nuclear Association, 2011) These three companies compete for new nuclear projects and are largely responsible for the spike in the number of planned nuclear power facilities. They do not receive the capital for their projects from the central government. Instead, they receive loans from state banks or equity investments from municipal or provincial energy development corporations—both of which are controlled by local, rather than national, officials. (Brookings, 2008) This illustrates a more serious problem in China: the growing tensions between the central government, which makes policy, and local governments, which implement it.

The disconnect between regulators at the national level and investors on the local one may lead to greater safety risks. Chinese SOEs may actually construct too many facilities for regulators and engineers to handle. If China’s nuclear ambitions are realized, the number of regulators and engineers needed to staff the new plants will have to more than quadruple. (World Nuclear Association, 2011) It is easy enough to build a nuclear power plant that satisfies all safety regulations, but the most important element to nuclear safety is constant and consistent maintenance. (Lester, 2011) It takes between 4 and 8 years to train a nuclear engineer or regulator and even longer to develop a culture of constant and consistent maintenance. Current trends have not been optimistic. (IAEA, 2011) In fact, the NDRC has recommended that the Chinese strive for 70GeV of electric power generation from nuclear power facilities by 2020 but current corporate estimates show that that number is expected to exceed 80GeV. (World Nuclear Association, 2011) CNNC is expected to invest $120 billion dollars in nuclear energy projects by 2020. (Ahrens, 2010) CGNPG, the most active of the three major nuclear companies, is expected to operate or construct 32 units new units by 2020—many of them already under construction. (World Nuclear Association) The Central Government is indirectly to blame for some of this corporate excess. By mandating that developed provinces like Guangdong maintain high growth rates, pressure is put on local leaders to stimulate growth, sometimes with inefficient energy projects.

Conclusions

China’s energy future may be heading towards disaster. The country may be home to more nuclear facilities than it can handle. The Central Government’s emphasis on supplying new energy to meet rising demand does not make a nuclear accident any more forgivable. If a massive earthquake were to strike coastal China, the social outrage would easily outweigh that of Fukushima or Sichuan. The social costs would also be much higher, and could have political consequences for the staying power of the Chinese Communist Party (CCP). All indicators point toward China’s persistence in its nuclear program. Constant technological innovations will increase safety, but they will fail to reduce the risk of a disaster if there are insufficient personnel to provide maintenance. It is also worth remembering that the majority of nuclear reactors being built in China today are Gen II—comparable to Fukushima—and that they benefit from few of the technological innovations mentioned above. China’s nuclear ambitions run the risk of self-inflicted tragedy.

Wind and solar technologies are hardly perfect substitutes. Their development is attributed primarily to the interaction between corporate and local interests rather than the prescriptions of national priorities. The politics of China’s 5 major grid companies are not well understood, but it is at least clear that they impede progress in developing a smart grid. Each year China adds the equivalent of the United Kingdom’s power grid to its repertoire, gradually eroding its ability to implement a smart grid capable of connecting the country’s incredible energy potential. Ultimately, China’s long-term energy development decisions are made by corporate and local actors with neither the incentive nor the ability to see the big picture.

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